Double-dip recession likely

As Philippines struggles with COVID-19

MANILA, Philippines  —  The possibility of a double-dip recession for the Philippines has increased as the government’s move to reimpose strict lockdown measures still failed to bring down COVID-19 cases in the country, a global think tank said.

In its latest economic monitor, UK-based Pantheon Macroeconomics said a double-dip recession is now looking inevitable.

A double-dip recession is a situation wherein a recession – characterized by two consecutive quarters of economic decline – is followed by a short-lived recovery and then back to another recession.

Pantheon estimates that first quarter gross domestic product (GDP) would grow by 2.2 percent, only to contract anew by 1.5 percent in the second quarter.

Pantheon senior Asia economist Miguel Chanco said momentum is now fading heading into the April to June period as the hit from the second wave is shaping up to be immense.

Even with the two-week lockdown, COVID-19 cases are still averaging at around 10,000 daily, and yet the government downgraded the quarantine status until April 30.

While consumption increased in the first quarter, this is not much of a reprieve as low-base effects would prompt a strong bounce-back as the Philippines suffered one of the deepest contractions in household spending.

“A number of factors have weighed on households since the recovery began, including a marked acceleration in inflation, a stagnating labor market, and the massive drawdown in savings last year,” Chanco said.

“Momentum was dissipating in the run-up to the current quarter. The adjusted monthly rise in net sales has softened while the monthly declines in consumer goods imports have worsened gradually since the start of the year,” he said.

Most importantly, Chanco said the expected strong hit from the still surging COVID-19 cases would imply that recovery in household spending may need to start from square one.

Mobility indicators have nosedived to their lowest levels since the first lockdown last year. Last week, trips to retail and recreation venues plummeted 72 percent below the pre-COVID baseline.

Further, the seven-day average in new cases settled at around 10,000 while the week-on-week increase slowed to approximately 15 percent. However, testing also dropped by 15 percent.

Chanco said the key metric to watch, at this stage, is the case positivity rate, which is high – at one-in-four – and still rising, suggesting that the outbreak continues to run rampant.

“For now, our base case is that a meaningful relaxation of curbs is unlikely to take place until May, at the earliest,” he said.